FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
Assistance Listings Numbers: 10.553, 10.555
Federal Award Number and Year (or Other Identifying Number): FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school who meets the applicable program's definition of "child,"
may receive meals under the applicable program. In the case of the National School Lunch Program and
School Breakfast Program, children belonging to households meeting nationwide income eligibility
requirements may receive meals at no charge or at a reduced price. Children who have been determined
ineligible for free or reduced-price school meals pay the full price, set by the School Food Authority, for their
meals. As a general rule, a child's eligibility for free or reduced-price meals under a Child Nutrition Cluster
program may be established by the submission of an annual application or statement which furnishes such
information as family income and family size. Local educational agencies, institutions, and sponsors then
determine eligibility by comparing the data reported by the child's household to published income eligibility
guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility
determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start
Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may
furnish documentation of its participation in one of these programs; or the school, institution, or sponsor
may obtain the information directly from the state or local agency that administers these programs. Certain
foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and
breakfasts. Direct certified households do not need to complete an application.
The Food Service Director was responsible for generating and reviewing the direct certification
report. The Food Service Director downloaded the direct certification report from the Indiana Department
of Education in July and then bi-monthly thereafter in fiscal year 2022-2023. The July report was provided
to the Information Technology (IT) department to upload into the School Corporation's software system;
whereas the bi-monthly reports were sent to the IT with a list of students to be added. Students were not
removed during the year. There was no review or approval process over the initial upload or any additional
uploads of direct certifications completed by the IT. In addition, there was no review or approval of the
direct certification data provided by the Food Service Director to the IT Department to ensure the student's
information added during the year is complete and accurate.
A sample of 40 students receiving free or reduced-priced lunches were selected for testing. Of the
40 students tested, the School Corporation could not provide documentation supporting the eligibility of the
student for 10 students. Of the 30 remaining students, the School Corporation could not provide documentation
that 1 student's benefits were calculated properly. Due to the lack of supporting documentation,
we were unable to determine if student's receiving free and reduced-price meals were eligible to receive a
free- or reduced-price meal.
In addition, there was no documented internal control to ensure that the eligibility parameters
entered into the School Corporation's computer software system were correct. Eligibility parameters were
entered into the system by one employee without an oversight or review process to verify the information
entered was accurate.
The lack of internal controls and noncompliance was isolated to fiscal year 2022-2023.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.334 states in part:
"Financial records, supporting documents, statistical records, and all other non-Federal entity
records pertinent to a Federal award must be retained for a period of three years from the date
of submission of the final expenditure report or, for Federal awards that are renewed quarterly
or annually, from the date of the submission of the quarterly or annual financial report,
respectively, as reported to the Federal awarding agency or pass-through entity in the case of
a subrecipient. . . ."
7 CFR 245.6(c)(4) states:
"Calculating income. The local educational agency must use the income information provided
by the household on the application to calculate the household's total current income. When a
household submits an application containing complete documentation, as defined in § 245.2
and the household's total current income is at or below the eligibility limits specified in the
Income Eligibility Guidelines as defined in § 245.2, the children in that household must be
approved for free or reduced price benefits, as applicable."
7 CFR 245.6(e) states:
"Recordkeeping. The local educational agency must maintain documentation substantiating
eligibility determinations on file for 3 years after the date of the fiscal year to which they pertain,
except that if audit findings have not been resolved, the documentation must be maintained as
long as required for resolution of the issues raised by the audit."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management statements of what should be done to effect internal controls, and
procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, student eligibility for free- or reduced-price meals could not be determined.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure student eligibility for free or reduced price
meals is accurately determined and that all documentation is retained.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.